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How Financially Strong Is Summer Infant Inc (NASDAQ:SUMR)?

Rowena Monahan

Investors are always looking for growth in small-cap stocks like Summer Infant Inc (NASDAQ:SUMR), with a market cap of US$17.19M. However, an important fact which most ignore is: how financially healthy is the business? Since SUMR is loss-making right now, it’s vital to understand the current state of its operations and pathway to profitability. Here are a few basic checks that are good enough to have a broad overview of the company’s financial strength. Though, I know these factors are very high-level, so I suggest you dig deeper yourself into SUMR here.

Does SUMR generate enough cash through operations?

SUMR’s debt levels surged from US$45.71M to US$49.71M over the last 12 months , which comprises of short- and long-term debt. With this growth in debt, the current cash and short-term investment levels stands at US$681.00K for investing into the business. On top of this, SUMR has produced cash from operations of US$1.21M over the same time period, leading to an operating cash to total debt ratio of 2.44%, indicating that SUMR’s current level of operating cash is not high enough to cover debt. This ratio can also be interpreted as a measure of efficiency for unprofitable businesses as traditional metrics such as return on asset (ROA) requires positive earnings. In SUMR’s case, it is able to generate 0.024x cash from its debt capital.

Can SUMR meet its short-term obligations with the cash in hand?

With current liabilities at US$37.71M, it appears that the company has been able to meet these commitments with a current assets level of US$72.31M, leading to a 1.92x current account ratio. Generally, for Leisure companies, this is a reasonable ratio since there is a bit of a cash buffer without leaving too much capital in a low-return environment.

NasdaqCM:SUMR Historical Debt May 25th 18

Is SUMR’s debt level acceptable?

With total debt exceeding equities, SUMR is considered a highly levered company. This is not uncommon for a small-cap company given that debt tends to be lower-cost and at times, more accessible. However, since SUMR is presently loss-making, there’s a question of sustainability of its current operations. Running high debt, while not yet making money, can be risky in unexpected downturns as liquidity may dry up, making it hard to operate.

Next Steps:

SUMR’s cash flow coverage indicates it could improve its operating efficiency in order to meet demand for debt repayments should unforeseen events arise. Though, the company exhibits proper management of current assets and upcoming liabilities. This is only a rough assessment of financial health, and I’m sure SUMR has company-specific issues impacting its capital structure decisions. I recommend you continue to research Summer Infant to get a more holistic view of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for SUMR’s future growth? Take a look at our free research report of analyst consensus for SUMR’s outlook.
  2. Valuation: What is SUMR worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether SUMR is currently mispriced by the market.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.


To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.